Price Gouging Pharmaceuticals?

by pharmacy on April 26, 2011

Some drug companies are grabbing up exclusive rights to common, previously untested medications and jacking the prices up to sky-high levels. How did this happen?

Two million Americans suffer from gout, which causes debilitating joint pain in toes and fingers, elbows, and wrists. One of the most common drugs prescribed to alleviate the symptoms is a compound called colchicine that’s been in use since the sixth century. Until January, there was no issue. Colchicine was widely available, manufactured by a number of companies, and incredibly cheap. It was retailed as low as 10 cents per pill. Until January. That’s when URL Pharma got exclusive rights, assigned an exclusive trade name (Colcrys), and hiked the price to $5 per pill.

Another example of shocking increase in the cost of medication is 17 alpha-hydroxyprogesterone caproate, commonly abbreviated to 17OHP. In February, K-V Pharmaceutical Co. formulated a version of the drug, tested it, and applied for a patent for a drug that was previously formulated by a number of pharmacies. Patients could purchase the previous injection, prescribed to prevent pre-term births in pregnant women, for $15 per treatment. The purchase price of the now-proprietary prescription called Makena, is $1,440 per treatment. For the tens of thousands of pregnant women who need an average of 20 treatments of Makena during their pregnancies, and for the insurance companies that cover part or all of the cost, the extreme price hike came as quite a shock.

How did this happen?

It all started in 1962. That was the year the FDA launched an initiative to remove untested drugs from the market. In the early years of the initiative, about 2% of prescribed medications were untested. In the intervening years, approximately 1,000 unapproved drugs have been taken off the market. There are still a number of untested and unapproved drugs on the market that were prescribed prior to 1962 and are still in use today – illegally.

The FDA stepped up its efforts with a new Unapproved Drugs Initiative launched in 2006. And that was the beginning of the controversy. The intentions of the FDA are clear and beneficial. The initiative calls for testing to prove the effectiveness and safety of the medications. To address the problem, the FDA takes a two-pronged approach. Either the companies are warned to stop producing unlicensed drugs by a specified date, or the manufacturers are warned of a pending crackdown. The theory is to give the manufacturers the option to conduct testing and bring the products up to code, or stop producing them. In nearly 100 cases to date, the testing was performed and the drugs approved by the FDA for legal distribution. That was the case with Colcrys and Makeda.

The controversy arises from the questionable practice of outrageous price hikes for a drug that is not new to the market. The FDA has no input or control over the retail price of drugs. Pharmaceutical companies base the price hike on the testing procedure. The documented testing procedures for Colcrys and Makeda, however, do not justify the extreme price hike for these drugs. Senators Sherrod Brown (D) of Ohio and Amy Klobuchar (D) of Minnesota, have spearheaded the call for a price-gouging investigation centering on K-V Pharmaceuticals

What’s your take? Are the sky high price increases justified? Or are some pharmaceutical companies indulging in privateering at the expense of the consumer simply because they can?

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